ARMANI: a hotel in Russia’s Caucasus?
This article is about the diversification of Giorgio Armani’s group into a luxury hotel brand. The group has already a luxurious hotel in Dubai since April 2010, but plans to open a new one in Russia’s Caucasus.
The cost of this project is around 150 million dollars. Promoters expect to break even in 8 years. At first glance, it can seem very risky since this particular region has a history of big instability. On the other hand, Russian people in particular love luxury brands and spas resorts. They will be hosting next winter Olympic games in Sochi and the mineral springs area is very rich in commodities, natural resources, and mountains.
Fashion luxury groups already have diversified their activities in hotel brands as Cheval Blanc for LVMH. What is driving these groups? Is it only diversification or potential benefits in reaching more clients? The big advantage for them is that their name already represents a known quality. But the big question is how far luxury companies can get their operations diversified without having their brand diluted or getting consumers confused? Maybe they are anticipating inflation in commodities and to attract people in that region. On the other hand, Russia will be also hosting the World Cup in 2018, which could mean an increasing demand in hospitality area. What do you think?
Just as Nodi, i wonder more and more how far luxury brands are ready to go. After its Emporio Armani caffè in saint germain des prés, Atmani is not the first luxury brand to diversify in hospitality / restauration. Dior already did it with its Dior Spa, Ralph's by Ralph Lauren, and as Nodi mentioned, Cheval Blanc by LVMH.
ReplyDeleteOf course, if the business is properly run, it can be very profitable for the brands, as the financial leverage is very high in the hospitality and the restaurant industries. But do these brands have the expertise required for this activity ? This is what I wonder. Diversification is always profitable, but they have to be careful because sometimes doing too many things at the same time can lead to trouble the consumer's mind, and one good expertise is sometimes beter worth than too many diversified activities.